The following terms may be useful in understanding division of retirmenet benefits through Qualified Domestic Relations Orders (QDRO’s).
Actuarially Equivalent — Different benefits or benefit forms having the same value as of a given date using a specified set of assumptions.
Alternate Payee — A participant’s spouse, former spouse, child, or other dependent who, under a QDRO, has a right to receive all, or a portion, of the participant’s pension benefits under a plan.
Annuity — A form of benefit in which payments are made at regular intervals for a specified period of time. The most common form of annuity pays monthly benefits for life.
Beneficiary — The person named to receive benefits upon the death of a participant or alternate payee.
Benefit — A payment provided for under a pension plan.
Certain-and-Continuous (C&C) Annuity — An annuity that pays benefits over the longer of the recipient’s life or a specified period.
Contingent Alternate Payee — An alternate payee under a QDRO whose benefit is contingent upon the death of an alternate payee.
Defined Benefit Plan — A type of pension plan that promises participants specified benefits at retirement. Retirement benefits usually are based on the number of years worked for a company or in an industry and may also be based on salary during that time.
Defined Contribution Plan — A type of pension plan in which an employee receives the amount in an individual account, which includes contributions made by the employer and, if applicable, the employee. Retirement benefits are based on the amount in each participant’s account, adjusted for investment experience and plan expenses. The most common types of defined contribution plans include profit-sharing plans, 401(k) plans, employee stock ownership plans (ESOPs), thrift savings plans, and money purchase plans.
Domestic Relations Order — Any judgment, decree, or order (including approval of a property settlement agreement) that (1) provides child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (2) is made pursuant to a state’s domestic relations law.
Earliest PBGC Retirement Date (EPRD) — The “earliest PBGC retirement date” has a specific meaning for PBGC purposes and is defined in PBGC regulation 29 C.F.R. §4022.10. Typically, a participant’s age as of his or her EPRD will be 55 unless (1) under the plan’s terms, the participant cannot receive a benefit until a later age, or (2) PBGC determines under a facts-and-circumstances test that the participant could retire earlier than 55. PBGC tells each participant what his or her EPRD is in a benefit determination.
Guaranteed Benefits — The amount of a pension plan’s benefit that is guaranteed by PBGC as of the plan’s termination date.
Joint-and-Survivor Annuity — An annuity that pays benefits over the participant’s lifetime and thereafter over the lifetime of the person named as the survivor.
Life Expectancy — The number of years a person is expected to live, on average, after a given age.
Lump Sum — A form of benefit payment in which the entire benefit is paid at one time.
Normal Retirement Age — The age for normal retirement defined under a plan. In most cases, the normal retirement age will not be greater than 65 years of age or, if later, the fifth anniversary of the date the participant commenced participation under the plan.
Participant — An employee or former employee who may be entitled to a benefit under a pension plan, or whose beneficiaries may be entitled to a benefit. A participant is said to participate in or to be covered by the plan.
PBGC Model Child Support Shared Payment QDRO — The PBGC Model Child Support Shared Payment QDRO gives the alternate payee a portion of the participant’s benefit payments under the plan during the participant’s lifetime. This model is designed to provide child support only; it is a simpler version of the PBGC Model Shared Payment QDRO.
PBGC Model Separate Interest QDRO — The PBGC Model Separate Interest QDRO divides the value of the participant’s benefits into two separate parts—one for the participant and one for the alternate payee. This model also allows for the assignment of survivor benefits.
PBGC Model Shared Payment QDRO — The PBGC Model Shared Payment QDRO gives the alternate payee a portion of the participant’s benefit payments under the plan during the participant’s lifetime. In other words, the participant and the alternate payee share the payments. This model also allows for the assignment of survivor benefits.
PBGC Model Treat-as-Spouse QDRO — The PBGC Model Treat-as-Spouse QDRO treats the alternate payee as the participant’s spouse for purposes of a qualified preretirement survivor annuity (QPSA), a qualified joint-and-survivor annuity (QJSA), or both. This model does not provide any part of the participant’s benefit to the alternate payee as a shared payment or separate interest.
Plan Administrator — The person or persons who administer the plan. If no one is designated as the administrator in the plan document, the employer is considered to be the plan administrator.
Qualified Domestic Relations Order (QDRO) — A QDRO is a domestic relations order that gives an alternate payee the right to receive all or a portion of the benefits payable to a participant under the plan, and that PBGC determines meets certain legal requirements with respect to information that must be provided, and provisions that cannot be included, in such an order.
Qualified Joint-and-Survivor Annuity (QJSA) — A QJSA is a joint-and-survivor annuity where (1) the participant receives a definite amount of money at regular intervals for life, and (2) after the participant dies, the surviving spouse (who may be the spouse to whom the participant was married at retirement, or a former spouse who is treated by a QDRO as the participant’s spouse) receives a definite amount of money (not less than 50% or more than 100% of the amount received by the participant before death) at regular intervals for life.
Qualified Preretirement Survivor Annuity (QPSA) — A QPSA is an annuity provided to a surviving spouse when a vested participant dies before receiving payment of his or her benefit. The annuity is paid for the life of the surviving spouse (who may be the spouse to whom the participant was married at the time the participant died, or a former spouse who is treated by a QDRO as the participant’s spouse), is calculated based on the benefit that had been earned by the participant before death, and generally is equal to the survivor’s portion of the QJSA. In PBGC-trusteed plans, the surviving spouse may elect to receive the QPSA in the form of a straight life annuity or certain-and-continuous annuity.
Single Life Annuity — An annuity that pays benefits over a period of time that depends, at least in part, on the survival of only one person, for example, a straight life annuity or certain-and-continuous annuity.
Spousal Consent — A spouse’s written and notarized agreement to allow the participant to waive the QPSA or elect a form of benefit other than a QJSA.
Spouse — Husband or wife as determined under applicable law. A QDRO can provide that the participant’s former spouse be treated as the participant’s spouse for certain pension benefits.
Straight Life Annuity — An annuity that pays benefits over the recipient’s lifetime. Once the recipient dies, no further annuity payments are payable to anyone.
Subsidized Early Retirement Benefit — Many plans allow “early retirement,” that is, a participant may retire before the participant reaches the normal retirement age defined under a plan. Some plans actuarially reduce the early retirement benefit to reflect the longer payout. Other plans may not reduce the benefit at all—for example, paying the same amount per month starting at age 60 as the participant would receive starting at age 65. To the extent that the benefit is not reduced actuarially, or only partially reduced, the benefit is a subsidized early retirement benefit.
Survivor Benefit — The survivor part of a preretirement survivor annuity or a joint-and-survivor annuity that is paid to a beneficiary after the participant dies.
Value — The actuarially determined amount needed at a point in time to provide a specific monthly benefit at some time in the future. Value depends on the amount of the monthly benefit payment, when the benefit payments start and stop, the age(s) of the recipient(s), mortality assumptions, and interest assumptions. Also referred to as “present value” or “actuarial present value.”